Oracle had $288 billion in commitments for leases not yet in effect at Aug. 31, underscoring the scale of its data center expansion as quarterly capital expenditures outpaced cash generated by operations.
Capital expenditures totaled $28.5 billion for the three-month period, while operating cash flow came to $23.1 billion. The difference left free cash flow at negative $5.4 billion. Customer prepayments with a significant financing component accounted for $11.4 billion of the operating cash total.
Oracle said nearly all the future lease commitments concerned data centers. The leases were not yet in effect, so the commitments did not appear on its Aug. 31 balance sheet or lease maturity schedule. The commitments are separate from Oracle’s reported notes and other borrowings: $117.7 billion classified as noncurrent and $7.6 billion as current. Their absence from the balance sheet reflects the leases’ status, despite the size of the commitments.
Share sales brought Oracle $19.9 billion in net proceeds during the quarter, separate from operating cash flow. In July, S&P Global Ratings cut Oracle’s rating to BBB-, one notch above speculative grade. The company has made maintaining an investment-grade rating a financing priority.
Cloud infrastructure revenue reached $7.4 billion, up 121% from a year earlier. Oracle also reported $664 billion in remaining performance obligations. That balance measures contracted amounts the company has not yet recorded as revenue; it is not cash already collected under those contracts.
Credit markets have also focused on Oracle’s financing. CNBC reported that a quote for a five-year credit default swap reached 295 basis points on Oct. 19. As earlier coverage of the credit quote explained, the quote prices protection against a defined credit event; by itself, it does not mean Oracle defaulted.
Oracle expects revenue recognition during the 12 months after Aug. 31 for about 13% of its remaining performance obligations.
